Business Post lifts market share in mail

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By John Willman, Business Editor

Published: November 19 2008 08:17 | Last updated: November 19 2008 08:17

First-half pre-tax profit at Business Post soared 25 per cent, as the parcels and postal delivery group increased its share of the mail handling market.

The group’s UK Mail subsidiary now collects and sorts 13 per cent of postal items before handing them on to Royal Mail for final delivery, compared with 11 per cent six months ago.

The second half had started in line with management’s expectations of moderate overall revenue growth, Guy Buswell, chief executive, said on Wednesday.

“We are clearly entering a more challenging economic period. However, our model, underpinned by a strong balance sheet, is robust. We are successfully developing our business streams across a broader base of activities and with a focus on longer term contracts in areas less directly exposed to levels of economic activity.”

Group revenues were up 16.3 per cent in the six months to September 30, from £167.3m to £194.5m. Profit before tax increased from £4.8m to £6m.

Revenues at UK Mail, one of Royal Mail’s main competitors, rose 34.4 per cent to £80.1m (£59.6m), buoyed by success in attracting new business and growth in volumes from existing customers.

More than two-thirds of the mail volume was based on delivering regular statements or statutory notifications, Business Post said – and therefore less exposed to fluctuations in economic activity.

UK Mail is introducing new services, such as iMail, which allows customers to electronically transmit post to mail centres close to its destination for printing and delivery. “Disguised mail” allows the delivery of sensitive items disguised as ordinary mail to save the cost of signed-for delivery.

Parcels revenues rose modestly, up 2.6 per cent in the first half to £89.1m (£86.8m). However, the increase was due to growth in business-to-business parcels, with business-to-consumer revenues down 2.7 per cent.

Increased fuel prices reduced profits from parcels, which were down 4.6 per cent to £6.2m (£6.5m). The division has cut its vehicle fleet by 10 per cent and reduced agency staff by a similar amount to boost margins.

After-tax profits fell from £3.3m to £2m, with a one-off charge of £2.2m because of the write-off of deferred tax balances following the withdrawal of industrial buildings allowances in this year’s Budget.

Earnings per share fell from 6.1p to 3.8p, but would have risen 29.5 per cent in the absence of the tax charge. The interim dividend is unchanged at 6.4p.